Pros and Cons of a Consol Box

In the course of business you might have heard of the term “Consol Box“.. In this article we look at what a consol box is, how it works and the pros and cons of a consol box..

The innovative idea of containerisation conceived by Malcom McLean 62 years ago, made globalisation possible and set it on a solid growth trajectory making it easier for shippers to ship their goods all over the world quickly, easily and safely..

As containersation evolved, so did the various sizes and types of containers and also container service types..

One of these container service types is FCL or Full Container Load.. In the FCL container service type, the full container is used by a single customer for their cargo exclusively..

In FCL, the client takes responsibility and liability for the packing and condition of the cargo packed in the container..

FCL is the most common container service type, but what happens to customers who don’t have enough cargo to fill a container by themselves..??

There are options for such customers to ship in smaller quantities and that option is called LCL shipment..

LCL stands for Less than Container Load which is when the same container is used for cargoes belonging to multiple shippers and consignees..

Consolidation refers to the act of “consolidating” (or Grouping as known in certain circles) various LCL cargoes by an operator known as a Consolidator (or Groupage Operator)..

The clients deliver their cargo to the packing station called CFS – Container Freight Station and the cargo is packed into the container..

This CFS maybe operated by the shipping line or by the Consolidator..

When this consolidation is done by the shipping line in their own warehouse, the container is termed as an LCL container and if this consolidation is done by the consolidator then the container is termed as Consol Box..

Although the concept of gathering several cargoes and packing it into a single container may be the same, there is a difference between LCL and Consolidation or Groupage..

So how does a consol box work..??

Well it is quite simple actually

1. Various shippers deliver LCL cargoes going to various destinations to the packing warehouse nominated by the Consolidator ;
2. Say the port of load is Durban ;
3. Consolidators usually have a few consolidation or deconsolidation (opposite of consolidation) points around the world – like Dubai for all Middle Eastern countries, Singapore for all Far East/South East Asian countries, New York for the Americas, Hamburg for EU etc ;
4. The consolidator will consolidate the cargo based on its final destination and arrange the packing accordingly ;
5. For example, the Far East, South East Asian, Australasian ports like Keelung, Penang, Sydney, Adelaide, Honiara may be booked via Singapore which could be the consolidator’s hub port for these areas ;
6. So the consolidator books a 20′ or 40′ container to Singapore as an FCL box on FCL/FCL terms with the shipping line ;
7. As far as the consolidator is considered, they received various LCL cargoes from the shippers and as such, their terms of shipment to their client will be LCL/LCL ;
8. Each shipper who has given the cargo to the consolidator will receive a House Bill of Lading for their cargo after the payment of all freight and any other dues ;
9. Container is loaded and the ship sails ;
10. The container is discharged at Singapore ;
11. The consolidator’s office or their agent at Singapore takes delivery of the FCL container from the shipping line and moves the full container to their warehouse ;
12. The cargo is then unpacked from the container according to the final destination of the cargo such as Keelung, Penang, Sydney, Adelaide, Honiara ;
13. Similar to these cargoes arriving from Durban , the consolidator will have cargoes to these destinations arriving from other locations such as New York, Mumbai etc ;
14. The consolidator then loads all Keelung bound cargoes into one container, Sydney bound cargoes into another and so on and so on till all the cargo they have received from Durban, New York, Mumbai has been reworked into the appropriate containers bound for these destinations ;
15. These containers then sail to the relevant destinations ;
16. Upon arrival at Keelung or Sydney, the consolidator’s office or their agent will take release of the full container from the shipping line and unpack the container at their warehouse ;
17. The consignees of these cargoes will approach the consolidator’s office or agent for release and will secure release of their cargo after surrender of the House Bill of Lading after payment of any destination dues..

LCL services by shipping lines used to be popular in the past, but I am not sure how many lines actually offer this service these days..

A Consol box is considered by many as a simple way to get shipments to their destinations cheaply and efficiently..

As a customer, you need to understand the way consolidation works and the options that are available for the proper planning, execution and delivery of goods to the destination..

As with any activity there are Pros and Cons of using a consol box which is discussed below..

Pros

1. If you are using a consol service, you don’t need to handle certain activities or incur costs associated with an FCL shipment such as

• picking up empty container from the line’s depot
• ensuring clean and sound condition container
• packing the container at your own or 3rd party warehouse
• arranging labour for the packing
• taking the full back to port

2. When using a Consol Box, you only pay for the space that you use.. The consolidator will calculate the space or weight (freight ton) your cargo utilises in the container and will charge you accordingly.. This cost may be cheaper than the full cost of FCL based on the usage of space/weight in the container..

3. Using a consol box may be advantageous if you want to avoid storing a large inventory of goods.. If scheduled correctly, you can receive the right amount of stock replenishment when you need it.. This also helps in managing and budgeting your cash flow..

4. The consolidator will advise you of specific packing dates open for specific destinations which will allow you to schedule your cargo deliveries..

5. You can also use consol service for testing the service reliability of a new supplier or for testing new products that you may be buying.. The smaller quantities provide flexibility to the shipper and consignee..

6. You may be able to secure a bill of lading as soon as you hand over the cargo to the Shipping Line (Master Bill of Lading in the case of LCL) or Consolidator (House Bill of Lading in the case of consolidation cargo).. The sooner you receive your bill of lading, the sooner you may be able to negotiate your payment with the bank or get your money from your customer upon submission of the bill of lading..

Cons

But, as with any business/service there are some cons with a Consol Box as well..

1. Finding a reliable consolidator with industry experience is one of the main challenges when shipping cargo in a consol box..

2. Consol shipments require more planning and organisation and shipper needs to be aware of cost, pricing, frequency of shipments, transit time, cargo dimensions in order to ensure effective planning..

3. A Consol box may be susceptible to delays at the origin CFS waiting for other cargo to the same port to be consolidated..

4. Due to multiple handling there is a chance of cargo damage as compared to FCL because the cargo maybe handled by a few different consolidation points.. There may be some destinations which require the cargo to be consolidated or handled twice..

5. There are chances of the entire container being detained for customs exam or investigation even if only one of the cargoes in the container is suspect.

6. There may be a difference in transit time between LCL and FCL to the same port and the shipper and consignee must be aware of this and arrange their shipments in line with this..

7. With a Consol Box you will be receiving a House Bill of Lading of the operator but you may still have to wait for the full Master Bill of Lading of the shipping line to be released before you secure release of your cargo..

Consolidation may not be for you

In shipping there is no “one size fits all” solution, so remember, a consol box may not be suitable for everyone even if they are shipping less than a full container capacity..

For example, if your cargo is more than about 12-14 CBM or heavy cargo such as Tiles etc, usually it may be cheaper to ship FCL as the per ton cost when using a consol box maybe higher in these cases..

This calculation is on the basis of economies of scale..

When we speak about economies of scale it is important to remember that LCL cargoes are charged based on “revenue ton” or “freight ton” or most commonly referred to as W/M..

W/M refers to weight or measure whichever is higher..

For example $20 per w/m to Singapore which means if your cargo is 2 tons in weight but 12 cbm in volume (think of cargoes like Baby Seats) then the rate would be 12×20 = $240 because that is greater than 2×20 = $20..

For example if your cargo 5 tons in weight but 3 cbm in volume (think of cargoes like Dumbells) then the rate would be 5×20 = $100 because that is greater than 3×20 = $60..

For same reasons of economies of scale, the consolidator uses a 40′ container as much as possible for consolidation..

In terms of weight, a 40′ container can carry more or less same weight as a 20′ container of about 26 tons.. But a 40′ GP container can carry about 66 cbm of cargo in terms of volume as compared to 33 cbm of cargo in a 20′.. A 40′ HQ can carry about 73 cbm of cargo and therefore a 40′ HQ is the most preferred container size/type for a consolidator.. This depends of course upon cargo availability..

Because there will be various types of cargoes in the container in various shapes (boxes, drums, cartons, reels, pallets, uneven shapes), there will always be some wasted space in a container..

So the tried and tested optimal maximum to achieve economies of scale on an LCL is between 12-14 cbm after which an LCL shipment might not be that cost effective and an FCL may start to sound better in terms of costing..

Finally

As you can see, there are several pros and cons of using a consol box.. But its not just about pros and cons.. Whether you want to use a consol box or not depends on what is suitable for your shipping needs..

Remember, in this business of logistics you have to keep an eye on the costs, the requirements, the nature of business and deadlines.. Good luck..